Kuala Lumpur Kepong Berhad's (KLSE:KLK) Dividend Will Be MYR0.20

Kuala Lumpur Kepong Berhad's (KLSE:KLK) investors are due to receive a payment of MYR0.20 per share on 29th of July. This means that the annual payment will be 3.0% of the current stock price, which is in line with the average for the industry.

Our free stock report includes 2 warning signs investors should be aware of before investing in Kuala Lumpur Kepong Berhad. Read for free now.

Kuala Lumpur Kepong Berhad's Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Over the next year, EPS is forecast to expand by 117.1%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 52% which brings it into quite a comfortable range.

View our latest analysis for Kuala Lumpur Kepong Berhad

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was MYR0.55 in 2015, and the most recent fiscal year payment was MYR0.60. Dividend payments have grown at less than 1% a year over this period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Kuala Lumpur Kepong Berhad May Have Challenges Growing The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Kuala Lumpur Kepong Berhad has been growing its earnings per share at 7.3% a year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Kuala Lumpur Kepong Berhad that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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